Which one of the following statements concerning risk is correct?
A) The financial risk of a firm is NOT affected by the capital structure of that firm.
B) An international firm has less exchange rate risk than a national firm.
C) A firm can lower its financial risk by lengthening the term of its debt.
D) The goal of financial engineering is to totally eliminate the financial risk of a firm.
E) A firm can reduce its financial risk by combining various types of operations.

Question

Quizplus · Accepted Answer

Financial risk can be reduced by diversifying operations, which spreads out the sources of revenue and potentially reduces the impact of poor performance in any single area. This approach can help stabilize cash flows and reduce overall risk.

Which One of the Following Statements Concerning Risk Is Correct